Function

• Decreasing-term life is designed to cover a specific period of time in the policyholder's life. The amount of insurance decreases throughout the period as the need for the insurance decreases. It is often used to protect a decreasing debt obligation, such as a home mortgage that decreases as the monthly payments are made.
  
  

Benefits

• Decreasing-term insurance will pay the face amount of the policy to the policyholder's beneficiary in the event of the policyholder's death. The beneficiary can use the money to pay off debt. This prevents the possibility that the beneficiary could lose the home or other financed item as a result of not being able to continue to make the payments.
  
  

Time Frame

• A decreasing-term policy typically lasts for the same length of time as the debt obligation. For example, if the policy is meant to protect a 30-year home mortgage, the policy will be taken out for 30 years. At the end of the period, the coverage will cease, although some companies will allow the policyholder to convert to a permanent plan without having to show evidence of insurability, such as proving they are in good health.
  
  

Considerations

• With some forms of term insurance, such as renewable term, the premium increases each year as the policyholder ages due to the increasing statistical likelihood of death occurring. However, with decreasing term, the premium remains the same throughout the life of the policy due to the decreasing value of the insurance.
  
  

Warning

• You should not purchase decreasing-term life with the idea of accumulating cash value over time. You pay for the insurance protection; no cash value will build up. This feature makes term insurance premiums less expensive than permanent life insurance.